TMI Blog2024 (4) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... s determined under Rule 3 of Point of Taxation Rules, 2011. Even if the allegations made in the show cause notice and in the impugned orders are to be accepted but the service tax on the entire taxable value has been paid on finalization of the service contract with the Government Departments. There cannot be any short/nonpayment of service tax - No exercise has been undertaken in the present case to correlate the payments received as advances, in case of completion of stage, even in case of continuous supply with final invoice issued on completion of the projects. Such a re-conciliation is necessary to determine the tax short paid, if any. In any case if the tax has been found to be paid against the entire value of contract/project undertaken by the appellant, there cannot be any further demand of service tax. In the case of M/S VODAFONE DIGILINK LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX [ 2019 (7) TMI 521 - CESTAT NEW DELHI] it was held that Since the point of taxation has not occurred under any of the clauses of the said Rule 3, the liability to pay service tax has not arisen. To undertake the exercises of re-conciliation, the matter needs to be remitted back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submitted post dated cheques and challans amounting to Rs.25 lakhs. 2.4 After scrutiny of records and investigations, revenue was of the view that the appellant has been providing services of Consulting engineer services but has not raised the bills as stated in his statement. A As per Rule 3 of Point of Taxation Rules, 2011 when the invoice is not raised within the time specified in Rule 4A of Service Tax Rules, 1944 then the point of taxation shall be the date of completion of provision of service. As per Section 68 (1) of the Finance Act, 1994, every person providing taxable service to any person shall pay service tax at the rate specified in Section 66B in such manner and within such period as may be prescribed under Rule 6 of the Rules. Thus, by not paying the service tax on these amounts appellant has not paid/short paid service tax amount in the manner as determined by Rule 3 of Point of taxation Rules, 2011, appellant has thus short paid the service tax of Rs.25,01,176/- by willfully suppressing the facts and have violated the provisions of Section 68 (1) of the Act read with Rule 6 of the Rules. 2.5 A show cause notice dated 19.09.2018 was issued to the appellant asking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant for providing the service starts with proposition of work followed by offer and if approved work starts and drawing design are made in parts and after acceptance of drawing, bills are raised as per stages of construction. If project continues supervision consultation on work continues and bills are raised in parts of the work undertaken. Sometimes work stop in midway on account of discontinuance of the project no bills are raised. Science appellant undertake the Government work bills are raised when service receiver is in a position to make the payment of bills and therefore bill are mostly raised after the consent of service provider. Particularly when the project is a long term continuous work and payments are made in part as per stage of work. The conclusion that appellant has raised bogus bills is without any merits as most of the bills were raised for Government Departmental work/projects. This conclusion of the adjudicating authority is only in the presumption and false allegation. The conclusion that all the works finalized during the period 20.06.2014 to 31.03.2016 and invoices were not issued, is wrong and baseless, inasmuch as in all completed work inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same irrespective of the fact that services were provided much before, d. receipt of payment in cash and non reflection of the same in the documents such as balance sheet, Form 26AS vis a vis ST-3 Returns, e. non issuance of invoices in all cases of advance received. 6.10 I further observe that the invoices in respect of all drawings/ works which were completed/ finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN, should have been issued at the time of completion of services in terms of Rule 3 of Point of Taxation Rules, 2011, if the same could not be issued within the time specified in Rule 4A of the Service tax Rules, 1994. As such all these drawings/ works were completed/ finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN and also admitted by the party in their statements that depending on the convenience of their clients, they did not issue the bills inspite of completion of service. Thus I hold that the party has not raised the bills/ invoices in respect of the services provided by them and have not assessed service tax due on taxable service, consulting engineering service provided by them and not paid/ shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service. Further, in case of receipt of advances towards provisional taxable service, the point of taxation should be the date of receipt of such advances. In terms of the above provisions of Rule 3, appellant is required to pay service tax on completion of an event specified in the contract or also in case of advances at the time of receipt of advances even though invoices/bills would not have been raised at that time. From the facts of the case it is clear that appellant has failed to pay the service tax at the time when it became due. As per the said rule undisputedly when the appellant raised the invoice in respect of these i.e. on completion of the project or at any time, they were making proper accountal and payment of service tax for which reason there is no discrepancy noted in the balance sheet, ST-3 return and from Form 26AS. Nothing has been brought on record as to the effect that service tax in respect of these payments received have not been paid. Adjudicating Authority has in para 6.9 and 6.10 observed as follows:- 6.9 I further observe that party's contention that during investigation their taxable value was not matched with their Balance sheet, Form 26AS vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Generally we use to take 10% to 25% of the total service charge as an advance, 65% - 80% of the total service charge on completion of drawing approval of drawing 10% of the total service charge on completion of the project. Then after we used to start our work by taking note of required design/taking print of the email of the concern client prepare our file for preparation of required design. We use to prepare design in duplicate on completion of drawing, we use to hand over the same in form of hard copy soft copy to the client. We used to contain a copy of the same in our record /file. After completing the design in most of the cases, we send the design to our client through our email Id spanstructures/@gmail.com. As on date there is record of 3836 primary email in my inbox 4326 emails in my sent mail. I will provide copy of the same within 02 days. Q-7. What procedure is adopted by you for issuance of the bill to the client? A. On completion of drawing with approval final submission of the same to the client, we use to raise the bill Bills quotations proposals are also sent through email. Q-8. Whether you issue bills to the client on receipt of advance intermediary amount on co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will pay the service tax liability along with interest. 4.7 The entire case against the appellant is that they have not paid service tax at the time as determined under Rule 3 of Point of Taxation Rules, 2011. Even if the allegations made in the show cause notice and in the impugned orders are to be accepted but the service tax on the entire taxable value has been paid on finalization of the service contract with the Government Departments. There cannot be any short/nonpayment of service tax. On the point of taxation rules determined the time when the tax has to be paid and in case of any delay in payment of tax the defaulter is required to pay the service tax along with due interest as prescribed under Rule 3 of Point of Taxation Rules, do not create any service tax liability but only determines the time of payment of service tax. No exercise has been undertaken in the present case to correlate the payments received as advances, in case of completion of stage, even in case of continuous supply with final invoice issued on completion of the projects. Such a re-conciliation is necessary to determine the tax short paid, if any. In any case if the tax has been found to be paid against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 (16) G.S.T.L. 209 (Mad.)] Hon ble Madras High Court has held as follows: 24. Rule 3(a) and (b) provides for the point of taxation to be either the point of raising of invoice [Rule 3(a)] or in a case where the service provider has received the payment even prior to the time stipulated in the invoice, upon receipt of such payment [Rule 3(b)]. In the present case, no invoice is said to have been raised. However, the petitioner confirms that it has, in fact, received lump sum advances corresponding to several initial landmarks in the contract, even prior to the achievement of such landmarks. As per the provisions of Rule 3(b), the entire sum received thus becomes taxable upon receipt and according to Mr. Prabhakar, has been offered to tax. 25. Instead of such determination by application of the provisions of Rule 3, the respondent relies upon the P and L accounts to conclude that the amounts reflected therein have not been offered for service tax. The reporting of income in the P and L being irrelevant for the purposes of determination of service tax payable, the basis of the impugned assessment is erroneous. 26. It is a well settled position that when a statutory provision or ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnizing revenue under the Project Completion Method‟ in terms of AS-7 issued by ICAI. We need not, in the present case, concern ourselves with the method followed for the preparation of financials as the same has no impact upon the Point of Taxation Rules. Suffice it to state that the AS provides a certain methodology for the computation of income from projects that is at variance with the method set out under Rule 3. 32. Insofar as Rule 3 sets out a specific modus operandi in this regard, it assumes priority and is the only relevant factor to be taken into account in the determination of point of rendition and accrual of services for the purpose of imposition of service tax. The first issue is answered accordingly. 33. As far as the application of Rule 3 is itself concerned, Mr. Sundar insists that the materials in support of the petitioners‟ stand have not been produced and relies upon the finding in the impugned order to this effect at paragraph 13.5 thereof (extracted earlier). The petitioner has, admittedly, produced the agreements setting out the slabs for payment and an annexure tabulating the receipts, upon completion of each stage of completion of the project b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (S.C.)]. The observations of the Supreme Court are as follows : 63. we are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11AB, the expression ought to have been paid would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11AB and as the rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. We have already noted that when an assessee in similar circumstances resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month for which the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest has to be paid. Thus, the demand of interest from the appellant for the period post March, 2013 upto March, 2014 is justified. 4.9 In case of ICICI Pudential Life Insurance [2019 (28) G.S.T.L. 145 (Tri. - Mumbai)] following has been held : 14. .. In the present dispute the appellant has admittedly paid duty according to their own interpretation of the point at which the tax liability arises. The claim of the appellant is that the service commences with the acceptance of the proposal. While that may be so, the tax liability is required to be computed from the moment the consideration is received even if the contract of insurance specified the commencement of risk from a different date. Both before and after the notification of the Point of Taxation Rules, 2011, it is the date of payment that determines the performance of the service for discharge of tax liability. In view of this, the appellant has discharged his duty liability belatedly; consequently the appellant is required to pay interest for the said delay. The provision of Section 75 of Finance Act, 1994 are unambiguous that the assessee is obliged to remit interest on delayed payment of tax. This is independent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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